What does “binding” mean?
When a policy is “bound,” that means coverage is in place. Likewise, when a carrier stops binding coverage—an action often called a binding restriction or an insurance moratorium—this means they’ve temporarily stopped taking on new customers and/or making any changes to policies.
How can a tropical storm or hurricane affect binding?
Binding restrictions normally occur in specific areas experiencing or about to experience a natural disaster, but those areas can be as small as a few counties or as large as an entire state. While tropical storms and hurricanes are some of the more common reasons to stop binding, unfortunately there’s no uniform rule for when carriers put binding restrictions in place. Depending on what region you’re in and what policy you’re discussing, insurers may put binding restrictions on only the specific areas the storm’s most likely to affect.
If there’s a tropical storm or hurricane watch anywhere in Florida, however, most homeowner’s insurance carriers issue a binding restriction for the entire state. Therefore, a tropical storm in the panhandle likely means there’s a binding restriction in Miami.
Policies for boats and cars, however, tend towards more flexibility. Instead of stopping binding for the whole state, insurance carriers are more likely to place boat and car insurance moratoriums specifically on the expected impact areas. Insurers will put these restrictions in place based on county or zip code.
Binding Restrictions and Loan Closings
Since many loan closings depend on your ability to get coverage for the property you’re trying to purchase, binding restrictions often cause problems during hurricane season. While carriers in other states may make binding restriction exemptions for loan closings, Florida insurance providers will not.
It’s important to time your binding accordingly, or else you may risk running out of time to bind insurance before you have to close the loan. Since agreed-upon interest rates can expire, insurance moratoriums can complicate matters. Especially during peak season—August through October—when hurricanes and tropical storms can develop in clusters. In such cases, insurance moratoriums can last one or two weeks instead of one or two days.
If you need to close a loan during hurricane season, it’s a good idea to try and bind your coverage earlier than normal.
It’s also important to talk to a trusted insurance advisor when you need to close a loan during hurricane season. They can tell you when insurance moratoriums will likely end, and constant contact with them can help you find the best time to bind your insurance.
If you don’t have a trusted insurance provider or would like a second opinion, feel free to reach out to us at D&A insurance!